Tech Brew Ride Home - Monday, Apr. 16, 2018 - US Punishes a Chinese Cellphone Maker

Episode Date: April 16, 2018

US punishes a Chinese cellphone maker, two interesting acquisitions (General Assembly and Earn.com), App Store earnings, original streaming content numbers, and some Android apps might be collecting data from kids. Links:Netflix Licensed Content Generates 80% of U.S. Viewing, Study Finds (Variety)How We Need to Remake the Internet (TED) Credits: Produced by @brianmcc and the @techmeme staff Music by @jpschwinghamer Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the TechMeme Ride Home for Monday, April 16, 2018. Today, the U.S. punishes a Chinese cell phone maker. Two interesting acquisitions, general assembly and earn.com, app store earnings, original streaming content numbers,

and Android apps might be collecting data from children. Here's what you miss today in the world of tech. The United States Commerce Department today announced that it is officially banning U.S. companies from selling components to Chinese telecom maker ZTE Corp for seven years after ZTE allegedly provided false statements to U.S. officials about shipping technology to Iran and North Korea. This could severely hamper ZTE's operations, as American companies apparently provide 25 to 30% of the components used in ZTE's devices. Last year, ZTE pled guilty in federal court to conspirators. to violate U.S. sanctions surrounding Iran and North Korea.

Eric Hirshhorn, a former U.S. Undersecretary of Commerce, told Reuters, quote, if the company is not able to resolve it, they may very well be put out of business by this. Many banks and companies, even outside the U.S., are not going to want to deal with them, end quote. Tech blogger Jeff Nolan tweeted, This is huge.

ZTE has $16 billion in revenue that depends on components manufactured by U.S. companies. Tech analyst Avi Greengart tweeted, Whoa, unless ZTE can somehow prove these assertions wrong, it looks like the U.S. government just killed ZTE's handset business. Among the U.S. companies that supply parts to ZTE are Qualcomm and Dolby, and in a seemingly coincidental story, a British-based cybersecurity watchdog service issued a warning to U.K. telecom companies,

not to use networking equipment from ZTE because it would have a, quote, long-term negative effect on the security of the UK, end quote. Ian Levy, the technical director of the National Cybersecurity Center, wrote in the letter, quote, The use of ZTE equipment or services within existing telecommunications infrastructure would present a risk to UK national security that could not be mitigated effectively or practicably, end quote. The U.S. already bars American telecom companies from buying networking equipment from certain Chinese telecom companies. Coding School General Assembly is being acquired by the Swiss Staffing and Workplace Development Company, a Deco Group, for $412.5 million in cash. You might know General Assembly as one of that wave of sort of programming finishing schools that hit the scene about a decade ago. but what you might not know is that over the last couple of years, General Assembly has pivoted away a bit from the consumer end of the business

to working more and more with business clients looking to retrain and re-skill workers. The new business model has been described as talent pipeline as a service, where General Assembly not only trains workers, but then recruits and places talent with corporate partners. General Assembly co-founder and CEO Jake Schwartz told Axios, quote, Last fall, we began mapping out on a whiteboard with Adeco how we could work together, so we've been having off and on conversations with them, end quote. Since Adeco group has staffing relationships with over 100,000 businesses,

this will obviously help General Assembly expand into the role it has stepped into. Elaine DeHays, chief executive of the Adeco Group, said in a statement, quote, by offering General Assembly services alongside the group's existing talent development, career transition, and professional staffing solutions, we will be able to better respond to client needs, enhancing both access to and the supply of the most in-demand skills, end quote. Adekko will reportedly run General Assembly as an independent entity. General Assembly was worth $440 million after its last $70 million investment round, but TechCrunch speculates that early investors,

including Jeff Bezos through his personal Bezos expeditions investment fund will likely have made out quite well. In another interesting acquisition, Coinbase today has confirmed that it is taking over Earn.com, which lets users earn Bitcoin by replying to emails or completing other tasks. The key part of this story is that Earn.com CEO Balaji Srinivasan is joining Coinbase as its CTO. The total value of the deal is rumored to be above the $120 million that Earn.com, formerly known as 21.C.O., had raised in VC money. And interestingly, the deal is in cash, stock, and some cryptocurrency. Prior to serving as the CEO of Earn.com, Shrinivasa was a general partner at Andresen Horowitz, and Andresen Horowitz is an investor in both Earn.com and Coinbase.

Brian Armstrong, Coinbase's co-founder and CEO, announced the news by writing on Medium, quote, Balaji has become one of the most respected technologists in the crypto field, and is considered one of the technology industry's few true originalists. As CTO of Coinbase, Bala G will serve an important role as the technological evangelist for the company. Bollagy will evangelize for both crypto and for Coinbase, educating the world and recruiting crypto-first talent to the company, end quote. So this is exactly how this sort of thing is supposed to work. There's a term venture capitalist used to like to use, borrowed from the Japanese,

Kerutsu, when a set of companies have interlocking business relationships through shared investments among VC companies, allowing top talent to amalgamate. Coinbase also recently launched its first venture capital fund, Coinbase Ventures, which will seed industry startups with, $15 million in early financing. Interesting story out of the entertainment industry Bible variety. We all know that Netflix, Hulu, Amazon, and all the other streaming services are spending billions of dollars every year to create original content. And so you would think that they are doing so to chase our immediate viewing attention.

But according to analysis from research firm Seven Park, only 20% of viewing on Netflix is of original content. fully 80% of U.S. viewing is of existing license content, things like Breaking Bad, Gray's Anatomy, How I Met Your Mother, Parks and Recreation, and Friends. Only 18% of Netflix's U.S. streaming customers are what Seven Park describes as originals dominant, or viewers whose habits tend toward mostly watching Netflix-produced originals. Even when some of Netflix's highest-profile shows are new in the queue, they still don't account for the majority of streaming, according to the study.

Quoting from the Variety Story, in the seven days after Stranger Things season one debuted, licensed shows were still only 63% of TV viewing. In the week following the premiere of Black Mirror, season three, around 88% of TV series viewing was licensed content, end quote. At Hulu, which, of course, has fewer original titles than Netflix, the numbers are even more stark. According to the study, 97% of Hulu streams were of licensed content.

The study covers the 12 months ending September 2017. But it also showed that viewing of original content is growing. For the 12-month period ending September 2016, just 12% of U.S. streams on Netflix were of Netflix originals, and this most recent study shows that that number increased to 20% this past year. And that's the point. The online streamers are investing in original content for two reasons. First, as HBO has known for decades now,

a breakout show can generate such buzz and attention in the zeitgeist that it can drive new subscribers. The idea is that once new subscribers are inspired by a hot show to dip their toes in the water, they'll stick around for the other content. And, of course, there's the obvious long game. Places like Netflix and Hulu haven't been around long enough to have generated many canonical fan favorites yet.

They have to license a show like friends from other content owners now, but going forward, Netflix hopes to have created its own friends-like properties, shows that can keep audiences coming back for years, even generations. That's why companies like Disney are jumping into the OTT game. They know that they have an incredibly deep catalog of surefire content that they can monetize right away. In theory, your Netflix's, your Hulu's, your Amazon Prime videos, will need decades to develop deep benches of content like that.

Unless, of course, one of these streaming upstarts purchases a major content owner. A couple of interesting stories about the app economy over the weekend. The App Store research firm Censor Tower reported that U.S. iPhone users spent an average of $58 on paid apps and in-app purchases last year, which was an increase of 23% year over year. That data does not reflect purchases on shopping apps like Amazon

or ride-sharing apps like Uber, but it does include revenue from subscription apps like Netflix and Tinder. The biggest category of apps that users either paid for or made in-app purchases from was, of course, games. In fact, 62% of in-app spending was on games, which is a 13% increase year-over-year, But other categories are actually growing faster. So-called lifestyle apps, which Censor Tower includes as apps like Tinder and Bumble,

grew by 110% year over year. The entertainment and social networking categories grew 57 and 38% respectively. And interestingly, the music category grew only 8%. According to the data, the average iPhone has downloaded 45 apps. And again, games rule the roost with an average of 13 games installed per device. But keep in mind, this data was only covering iPhone users. Sensor Tower's head of Mobile Insights, Randy Nelson, told TechCrunch, quote, We estimate that for each active Android device in the U.S. last year,

approximately $38 was spent on Google Play, on and in apps, so about $20 less than iOS. That tracks with the disparity in revenue generation we see between the stores outside the per device level. Android users generally spend less on or in apps. Google Play generated about 60% of the app store's revenue last year in the U.S., end quote. Of course, unlike on the iPhone, the Google Play store is not the only app store in town. There are others, the Samsung store, for example. And we spoke several times last week about the Fasta bill, took down the website back page as well as Craigslist's Personals ads category.

But there's another longstanding digital law out there that might be endangering a lot of Android apps. Copa, the Children's Online Privacy Protection Act, which tries to protect the privacy and limit the data collected from children under the age of 13, was enacted all the way back in 1998. But a recent study published in the journal Proceedings on Privacy Enhancing Technologies, suggests that around 3,300 free apps in the Google Play App Store, which are labeled family and child-friendly, were actually collecting data on kids in a way that might run afoul of COPA.

The study looked at 5,800 total apps and found that 5% collected user location or contact info, such as phone numbers or email addresses, without first obtaining parental consent as COPA law requires. 19% of those apps shared sensitive information with third-parts. party services, whose terms of service explicitly prohibited their use in children's apps. Of the 1,200 or so apps that integrated with Facebook, 92% did not correctly utilize Facebook's configuration options meant to protect users under 13. All in all, about 57% of the apps that were analyzed were found to be potentially violating COPA, according to the researchers. But the

researchers wanted to stress that their findings were not indictments and that only the FTC had the authority to decide whether or not the absent question were indeed running counter to provisions of the law. Finally, this is not a story so much as a people are talking heads up to keep you in the know. The annual TED conference took place in Vancouver last week, and one of the breakout talks, which has generated a lot of buzz, came from VR pioneer Jaron Lanier. The talk was titled by TED, How We Need to Remake the Internet, and I have a link to it in the show notes. In the talk, Lanier bemoans the free, ad-supported model of the internet

as a sort of original sin of our modern digital culture. Referring to social networks, but also companies like Google as well, Lanier said, quote, what started out as advertising really can't be called advertising anymore. It turned into behavior modification. I can't call these things social networks anymore. I call them behavior modification empires. Continuing later, quote,

I don't believe our species can survive unless we fix this. We cannot have a society in which, if two people wish to communicate, the only way that can happen is if it's financed by a third person who wishes to manipulate them, end quote. Recode's Dan Fromer said it was this talk that generated the most discussion from the tech industry attendees to the conference that he spoke to. And the information's Jessica Lesson wrote, quote, for a talk like this to resonate so widely among tech's inner circle, you know the mood has changed. That's all for today.

This is your semi-regular reminder to rate and review the podcast if you're enjoying it, especially on Apple Podcasts. We're still building out our audience at this point, and the reason every podcaster in the world harps on ratings and reviews is because they help us. They keep us in the top of the podcast charts so that more people can discover us. Thanks for listening to the Techmeme ride home. I've been your host, Brian McCullough. Follow me on Twitter at Brian MCC. And you can get all the latest tech headlines on Twitter. Every minute that they post, if you follow at Techmeme.com.

Talk to you tomorrow.